Welcome to the Caspian Sunrise website. This site contains detailed information on our ongoing operations in Kazakhstan, provides a complete history of the company and our accomplishments, and provides comprehensive, up-to-date information for our investors.

Caspian Sunrise is a Kazakhstan based oil and gas exploration and production company established in October 2006 and listed on the Alternative Investment Market of the London Stock Exchange in May 2007

Corporate Governance

From 28 September 2018 AIM companies are required to provide details of a recognised corporate governance code that the board of directors of the AIM company has decided to follow, explain how the company complies with this code and details where if departs from it including the reasons for doing so.

Last updated: 26 September 2018

Introduction from the Chairman

We fully understand the importance of being transparent and fair in our dealings with others. The introduction of the new corporate governance code rules provides a timely opportunity to review and present the way the Company is run and how we deal with others.

Caspian Sunrise PLC (“the Company” or the “Group”) has adopted the QCA Corporate Governance Code (the “Code”). We set out below detailed explanations of how we seek to comply with each of the QCA’s 10 principles.

We have identified three principal areas where we are not in full compliance:

The first relates to the position of Executive Chairman, where best practice under the Code is for the Chairman to be non-executive.

The second is that Caspian Sunrise PLC actively encourages non-executive directors to participate in the Company’s success via the option scheme.

The third is that with three directors, the board is too small to adopt all of the QCA recommendations.

We do not propose to change our stance on the first two areas noted above. We are, however, looking to strengthen the board with the appointment of an additional non-executive director.

We regard the new QCA Corporate Governance Code as a useful tool in making sure we treat others fairly and act properly. On its own, however, adherence to the Code is no guarantee of commercial success, which after all is our principal objective.

Caspian Sunrise’s objective is to create shareholder value from the development of oil and gas projects and associated activities. The Group has a number of secondary objectives, including promoting the highest level of health and safety standards, developing our staff to their highest potential and being a good corporate citizen in our chosen countries of operations.

Strategy

The Group’s long-term strategy is to build an attractive portfolio of oil and gas exploration and production assets in Central Asia, in particular Kazakhstan where the board has the greatest experience. Additionally, the Group will seek to exploit associated opportunities where the board believes it can add significant value and contribute towards the success of the Group as a whole.

The Group’s principal asset is its interest in BNG. The BNG Contract Area is located in the west of Kazakhstan, 40 kilometres southeast of Tengiz on the edge of the Mangistau Oblast. The Group is nearing the completion of the acquisition of 3A Best, a comparable asset to BNG located near the coastal city of Aktau. Further acquisitions are expected.

Our business model

Our business model is to invest in and develop promising oil and gas projects.

Growth in long term value will be measured by a sustainable appreciation in the share price and when appropriate by dividend payments.

Key challenges and how they will be addressed:

Exploration for and production of oil & gas are inherently high risk ventures. The Annual Report and Financial Statements sets out the principal risks and our approach to manage and mitigate these risks.

In addition, the Company is subject to various risks relating to political, economic, environmental, legal, social, regulatory, business and financial matters. Risk assessment and evaluation is an essential part of the Company’s planning and an important aspect of the Company’s internal control system.

The Company communicates with its shareholders principally via RNS announcements, its website, formal company meetings and periodic investor presentations. The need to treat all shareholders fairly by not selectively releasing price sensitive information, however, often limits our ability to provide the answers many investors seek.

The Company’s management meets prospective institutional investors from to time to time to assess the availability of large scale institutional funding to advance the company’s plans.

From its interactions with existing and prospective investors it is clear to the board the principal objective of shareholders is to maximise capital returns at an acceptable level of risk. The most common issue raised is when will the company commence sustained production from the deep wells drilled at BNG.

Approximately 81 per cent of the Company’s shares are held by members of a concert party comprising the Oraziman family (approximately 45%), other Kazakh shareholders (21.5%) and Korean shareholders (14.5%). The remaining approximately 19% of the share register comprises principally UK based retail investors.

During the current financial year, the Company has presented to both potential institutional investors and at specially organised events focussed on the retail market, including a dedicated Caspian Sunrise event in London. Additionally, the Company recorded a number of media interviews which are available to download on leading investor focussed websites and from the media section of the Company’s website: https://www.caspiansunrise.com/media/

The Company regards its employees and their families, local and national government and its shareholders to be the core of the wider stakeholder group.

Employees and Social responsibilities

Staff employed by the Group are based primarily in Kazakhstan. The Company draws most of its field workers from the Mangistau region where alternative employment opportunities are limited. The Company has provided significant financial support to this region for over a decade by way of social payments sometimes delivered in the form of medical or educational facilities for the local population. At our head office in Almaty we employ further staff, some of whom hold highly skilled positions.

As well as providing employees with appropriate remuneration and other benefits together with a safe and enjoyable working environment, the Board recognises the importance of communication with employees to motivate them and involve them fully in the business. For the most part, this communication takes place at a local level, but staff are kept informed of major developments through email updates and staff meetings.

It is the Group’s policy and practice to comply with health, safety and environmental regulations and the requirements of the countries in which it operates, to protect its employees, assets and environment.

External

In addition to the employment created for Company’s staff many additional jobs have been funded in the Company’s suppliers, partners and professional advisers.

To comply with Kazakh regulations, part of our obligations, including environmental obligations, under various work programmes on our Kazakh assets are paid in the form of contributions to local social programmes as set out in the Annual Report and Financial Statements. We are pleased to have assisted in the development of these projects and look forward to contributing to others in the coming years.

Kazakh Government Agencies and Regulators

The Kazakh authorities are responsible for granting licences to drill and produce oil. Licences are awarded subject to agreed work programmes being adhered to over the period of each licence renewal. This includes compliance with rules designed to preserve the environment.

A key differentiator for Caspian Sunrise is that we have an extremely high proportion of Kazakh nationals in our workforce and among our core shareholder group.

The Board believes that this helps create a positive relationship with the Kazakh authorities and has assisted the Company in gaining the licences it requires to carry out its operations in the country.

Feedback

The Company takes into account feedback from its stakeholders in its decisions and actions.

Risk assessment and evaluation is an essential part of the Company’s planning and an important aspect of the Company’s internal control system. Oil & gas exploration and production is a dangerous activity and as such is necessarily subject to an extreme health and safety regime.

As the Company develops, its approach to risk management and mitigation will be refined and is planned to include a formal risk register including all the principal operational and non-operational risks to the business. Such a risk register would be reviewed and assessed at least once a year by the Audit and Risk Committee.

For further details of the Company’s approach to risk and its management, please refer to the Principal Risks section of the Strategic Report of the Annual Report and Financial Statements.

At the executive level Kuat Oraziman, Chief Executive Officer, runs the Company’s operations in Kazakhstan with Clive Carver, Executive Chairman, taking the lead on all non-operational matters including financial matters and all aspects related to the listing of the Company’s shares on AIM, Corporate Governance compliance and Investor Relations.

Kuat Oraziman is a trained geologist and member of the academy of sciences. He has more than 25 years oil and gas experience in Kazakhstan.

Clive Carver is a fellow of the Institute of Chartered Accountants in England and Wales (FCA) and a fellow of the Association of Corporate Treasurers (FCT). While working in the UK broking industry Clive gained more than 15 years’ experience as a Qualified Executive under the AIM Rules having run the Corporate Finance departments of several of the larger and more active Nominated Adviser firms.

The board believes it possesses the skills required to build a successful and durable oil and gas business focused on Kazakhstan.

The board physically meets a minimum of four times each year supported by periodic telephone meetings. At such meetings the board receives a report from Kuat Oraziman on all matters operational and from Clive Carver on all non-operational matters.

The board also has a list of standing items, including compliance with the UK Bribery Act, litigation and existence of open and closed periods for director dealings, which are considered at each meeting.

The number of board meetings attended each year by the directors is set out in the Directors’ report which forms part of the Annual Report and Financial Statements.

Departures from the Code

Executive Chairman

The principal reason advanced by proponents of the Code that the Chairman be non-executive is to split the roles of Chairman and Chief Executive Officer as combining them puts too much control in one pair of hands. This is not the case with our Company. Indeed, the Chief Executive Officer, as well as being responsible for running the Company, is, with his family, the largest shareholder at some 45%.

Our approach generally is to seek to appoint the person most capable to do the job. Clive Carver was appointed Non-Executive Chairman of the Company in 2006 in the lead-up to the IPO the following year. In 2012 he was appointed Executive Chairman at the same time as Kuat Oraziman moved from Non-Executive Director to Chief Executive Officer.

In the past decade, Clive Carver has served as non-executive chairman of seven AIM listed companies. In addition, his 15 years as a Qualified Executive and head of active corporate finance departments make him a very suitable candidate to be Chairman, notwithstanding his executive status.

As prescribed by the Code our non-executive director takes the lead on the various committees of the board.

Non-Executive Directors’ participation in Option Schemes

In common with many AIM Companies we actively encourage non-executive directors to participate in the Company’s option schemes. The purpose of the Company is to grow shareholder value.

We believe that independence is a matter of independence of mind, judgement and integrity. We consider our non-executives’ ability to act independently to be unaffected by the level of participation in the Company’s option scheme.

Size of the board – requiring the involvement of Executive Directors in the various board committees

With only three directors it is inevitable that the board committees will comprise executive and non-executive directors. The Company accepts this is not a long-term solution and is actively seeking to appoint an additional non-executive director experienced in the Kazakh oil & gas sector.

Such a person has been identified and has confirmed their willingness to join the board with effect from 1 November 2018. At that time, subject to completion of the usual AIM director vetting, the composition of the various board committees (Audit & Risk, and Remuneration & Nominations) will be reviewed.

Operational skills are maintained through an active day to day interaction with leading international consultancies and contractors engaged to assist in the development of the Company’s assets.

Non-operational skills are maintained principally via the Company’s interaction with its professional advisers plus the experience gained from sitting on the boards of other commercial enterprises.

As the Company develops and in particular moves from predominantly an oil exploration company to a balanced production and exploration company, the board will periodically re-assess the adequacy of the skills on both the main board and the operational board. Where gaps are found, new appointments will be made.

The Company’s strategy and its shorter-term objectives are set out in the Strategic Review contained in the Annual Report and Financial Statements, including appropriate Key Performance Indicators (KPIs).

In recent times, the board has focused on developing BNG whilst avoiding unnecessary share issuances. Funding to achieve production has for the most part been raised from advances provided by local oil traders.

As the Company moves into sustained profitability, it will be a priority of the board to initiate the payment of regular dividends.

To date, no bonus payments have been paid to board members. As production and profitability increase, it is the intention that appropriate bonuses will be paid to executive directors based on an assessment of the KPIs noted above.

The Company currently does not evaluate board performance on a formal basis. However, it will in the near term seek to formalise the assessment of both executive and non-executive board members.

The Company is aware of its need to facilitate succession planning and the board evaluation process will form part of this going forward. There is currently, therefore, no evaluation material to present within this corporate governance statement. However, it will be published when possible.

Our culture can best be described as one where we strive for commercial success while treating others fairly and with respect. The board firmly believes that sustained success will best be achieved by following this simple philosophy.

Accordingly, in dealing with each of the Company’s principal stakeholders, we encourage our staff to operate in an honest and respectful manner. Given the simplicity of the culture we do not believe lengthy illustrations of our culture in action add much. In summary you know it when you see it and where you don’t.

Operating with integrity is clearly good business and forms an important part of the annual assessment of staff and in setting their pay for future periods.

Future Annual Report and Financial Statements will include a statement in the Corporate Governance section setting out the Company’s corporate culture and approach to ethical values and behaviours.

The Company’s governance structures have been reviewed in light of the introduction of the new QCA code. The Board believes them to be in accordance with best practice as adapted to better comply with Caspian Sunrise’s circumstances – as disclosed above.

The Company is confident that its governance structures and processes are consistent with its current size and complexity. The Board is aware that it must continue to review its practices as the Company evolves and grows.

The executive members of the Board have overall responsibility for managing the day to day operations of the Company and the Board as a whole is responsible for implementing the Company’s strategy. The Board comprises:

Kuat Oraziman, Chief Executive Officer, who has overall responsibility for managing the Group’s affairs in Kazakhstan;

Clive Carver, Executive Chairman, who is responsible for the Group’s finances and its activities in the UK, including the activities arising from Caspian Sunrise being a publicly listed company and investor relations; and

Edmund Limerick, who is the Group’s senior independent non-executive Director, and chairman of the Audit and Remuneration committees.

The Audit and Risk Committee typically meets before each set of results (interim and final) are published and the Remuneration and Nomination Committee typically meets at least once a year, when the Financial Statements for the Full year results are approved. All Committee members attend these meetings.

Our Report and Accounts have for many years contained a report from the Chairman of the Remuneration and Nomination Committee. In future periods our Report and Accounts will also contain a report from the Chairman of the Audit and Risk Committee.

The appropriateness of the Company’s governance structures will be reviewed annually in light of further developments of accepted best practice and the development of the Company.

The Company reports formally to its shareholders and the market twice each year with the release of its interim and full year results. The full year results are audited by an external firm of auditors with the interim statement usually subject to a limited review by the same external auditors.

The Annual Report and Financial Statements set out how the corporate governance of the Company has been applied in the period under review including the work undertaken by the Audit and Risk Committee and the Remuneration and Nomination Committee.

These reports contain full details of all the principal events of the relevant period together with an assessment of current trading and future prospects and the reports are made available via the Company’s website to anyone who wishes to review them.

The Board already discloses the result of general meetings by way of announcement and discloses the proxy voting numbers to those attending the meetings. In order to improve transparency, the Board has committed to announcing proxy voting results in future. In the event that a significant portion of voters have voted against a resolution, an explanation of what actions it intends to take to understand the reasons behind the vote will be included.

The Company’s website also contains all the information prescribed for an AIM Company under Rule 26.

Further details of the Company’s dialogue with its shareholders are set out under Principle 2 above

Employee stakeholders are regularly updated with the development of the Company and its performance.

We are in almost constant communication with our Governmental and regulatory stakeholders via their involvement in our day to day operational activities.